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NEW GFE - Summary of one Problem with HUD's Suggested Comparison.

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Mortgage and Lending NMLS142066/250013

This is a Members only post and I am looking for feedback about this Quick Reference to the NEW GFE.  I agree with HUD's Intent that consumers need to shop and compare GFE, however I believe there is a big problem with the New GFE.   I see no problem with the two Origination Fee Items (Box A) on the New GFE.   Where I have my problem is HUD;s suggestion that consumers use the Total of A & B.  

My question is "Do you think Lenders will take advantage of the NO LIMIT ON CHANGES?" with the intent to make their quotes more appealing to consumers. 

 

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Terry Lynch
LAR Notary and Closing Services - Saint Clair Shores, MI

I think the fact that the original GFE numbers will show on the final HUD will add a lot of transparency to the transaction.

Hopefully this will keep lenders from taking too many liberties with the "no limit on changes" provision.

Dec 15, 2009 01:57 PM
Margaret C. Taylor
Century 21 New Millennium MD - Mechanicsville, MD
St Marys/Calvert/Charles MD Real Estate Agent

I thought the no limits on changes referred only to buyer selcted items, not Lender items.  Please tell me what I am missing.  Thank you Margaret C.

Dec 15, 2009 02:03 PM
Tim Bradford
Cleveland, OH
NMLS 250013

Terry and Margaret, Thanks for your comments. 

Terry, you are correct with respect to the comparison at closing on the HUD-1.   The issue I have is that that will be way to late for a buyer to make any changes.  

Margaret, The lenders items are in BOX A.   The section I posted are generally the ones the buyer chooses the provider.   As said to Terry, I suspect some lenders will under quote the items that can change in order to make their GFE more attractive in order to get the deal and then when closing occurs, the numbers will be higher.  

Just my Opinion, It would be a GREAT world if ALL LENDERS quoted the with the same degree of ethics.  If that were true in the past this new GFE would be unnecessary. 

Dec 16, 2009 01:29 AM
Bill Ladewig
LoanOfficerSchool.com - Escondido, CA
Experience Is Your Advantage

Tim, contrary to what our legislators think, I think that most borrowers are less interested in individual amounts and will continue to look at the bottom line.  So the door to misrepresentation of closing costs is still wide open.

The same low life lenders who have always understated prepaid interest, impounds, escrow and title will continue because borrowers tend to look at the bottom line. 

It is our job to educate consumers so they won't be fooled and we won't lose business to the sharks.

Dec 16, 2009 03:34 AM
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Thanks for the post; I'm parked to see what others have to say.

Mike in Tucson

Dec 16, 2009 03:49 AM
Tim Bradford
Cleveland, OH
NMLS 250013

Bill and Mike,  Thanks for your comments.

Bill, I agree that consumers are just interested in bottom line.  Call me crazy, but nowhere in the GFE does that appear.  If the old GFE goes away the only place buyers will see the Bottom Line is on the last page of the 1003.   If a borrower tries to compare the New GFE against the Details of Transaction, I think they will become more confused.    Also, according to the FAQ on the HUD site, they are still working on the new GUIDE TO CLOSING COSTS.   It is hard to imagine a new STANDARDIZED GFE without HUD having a booklet to Explain it.   Also, when you say "WHAT LEGISLATORS THINK" were you joking???  Did they think this thru and are they prepared?  Consumer Education is the key not a NEW FORM.  The question is how do we educate consumers without offending HUD or violating their rules.  

Dec 16, 2009 04:52 AM
Bill Ladewig
LoanOfficerSchool.com - Escondido, CA
Experience Is Your Advantage

Tim, the bottom line is on page 1 where they add lenders costs (Origination Charges) to the other costs.

You are absolutely right!!!!  Consumer education is the only solution.  Consumers are lulled by all the rules to think they don't have to be careful which makes them easy prey to the skunks that figure out how to break or get around every new rule.

Lending is not brain surgery and consumers can be easily taught how to spot the the bad guys.

Dec 16, 2009 05:56 AM
Tim Bradford
Cleveland, OH
NMLS 250013

Bill,

You are correct that this is the most important for consumers to look at when reviewing a GFE.  Ideally a consumer should ask for all GFE on the same day and for the same Rate of Interest, then compare the Origination Fees represented as "A".   The issue is that in most cases the "B" items (Other Settlement Costs) are NOT Lender Controled.   This is where we need to educate consumers.    

Dec 16, 2009 06:20 AM
Bill Ladewig
LoanOfficerSchool.com - Escondido, CA
Experience Is Your Advantage

Tim, EXACTLY, and I just finished a blog on that very subject and credited you for the inspiration.

Dec 16, 2009 08:22 AM
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